Auto loans and lease applications soar in second quarter

Auto loan and lease originations follow industry pattern in Q2: record total and huge gains from Q2 2020, when COVID-related business shutdowns peaked, and also gains significant compared to the second quarter of 2019 pre-COVID.

That’s according to the latest quarterly household credit report from the Federal Reserve Bank of New York. Originations are national statistics, which include new and used car loans and leases combined.

“This is a serious high” of $201.9 billion in auto builds for Q2 2021, up 48.6% from Q2 2020 and up 29.8 % from the second quarter of 2019, according to researchers from the New Fed. “There is an increase in both the number of loans and the size of loans.”

However, borrowers with subprime loans continue to lose share of the overall increase. The share of auto issuance for borrowers with credit scores below 620 fell to 17.4% of the second-quarter total, from 18.5% a year ago and 21% two years ago, the one of the few trends that remains constant across all three time periods.

New York Fed researchers say they are monitoring the expiration of temporary forbearance programs to see how it might affect auto loans and delinquent loans. Lenders rolled out the programs last year due to the pandemic.

Millions of borrowers have been able to defer monthly payments on auto loans and mortgages, but those programs are set to end unless extended. Assuming the programs end, delinquencies are expected to rise for both auto loans and mortgages, but by how much remains to be seen.

For now, auto loan delinquencies of 90 days or more are down, to 4.35% of total outstanding, from 5.03% a year ago, and 4.64% in the second quarter of 2019 .

“We are watching auto loan forbearance closely,” the New York Fed researchers say. “There had been pretty high subprime (auto) loans, which led to the pandemic.”

During a press briefing on August 3, the researchers ask not to be quoted individually, in accordance with New York Fed policy. The authors of the Household Credit Report are all from the New York Fed’s Research and Statistics Group. They are: Andrew Haughwout, senior vice president; Donghoon Lee, an officer of the group; Joelle Scally, Chief Data Strategist; and Wilbert van der Klaauw, senior vice president.